Your business will require its own set of special insurancecoverages for the risks inherent in your industry. Sometimes thesecan be added as endorsements to your policy, or you can buy themseparately. Here are a few of the different types of specialtycoverage you may need:
Care, Custody and Control
This is a must for businesses in service industries, particularlythose with customer goods in their control anytime during thebusiness transaction. Should an accident happen, the insurancecompany would reimburse you and your customer. This is especiallyuseful to businesses that provide services such as framingpictures, furniture repair, bicycle assembly, dry cleaning and soon.
Basically, if you have a customer’s goods in your control at anytime during the business transaction, you’re liable for the fullvalue should an accident happen. You’re held liable even for themost insignificant handling of the customer’s property–holding andlosing athletic shoes while your customer is roller skating isconsidered an accident.
Consequential Losses
This clause should be inserted into a standard insurance propertyor fire insurance policy. For an extra premium, you can insure theextra expenses of obtaining temporary quarters, relocation andincidental expenses.
Business Interruption
This specialized insurance reimburses the business owner for futureprofits lost and fixed charges as a result of damages due to perilsspecifically accounted for in the policy. Weather damage is themost common cause. Other causes (e.g., a labor strike or materialshortage) are not covered. The inclusions (e.g., tornado,hurricane) and exclusions (e.g., mudslide or tidal wave), differ,depending on your geographic location.
Predicting a company’s profitability at a particular point inthe future can be tricky. If the company was operating at a loss,then only the fixed expenses that it incurred may be reimbursed.However, if your company is operating at a profit, then goodrecords (which underscores the importance of keeping duplicaterecords at another site) will support your case. If all the recordshave been destroyed in a fire, the previous year’s tax records canhelp.
Business-interruption coverage is particularly crucial forrestaurants, as they risk complete loss of income in the event offire while still being obligated to make rental and loanpayments.
There are even more specialized provisions withbusiness-interruption insurance. Under the terms of an extendedperiod of indemnity, the period of loss is defined as the periodnecessary to return to normal business operation. Otherwise, thepayments are only made until the business can physically reopen(even if in a makeshift pattern).
Peak season endorsements, which are even more specialized, coverthose service industries that make all their money during aparticular season. If your company is located in a snow belt, aspecialized form of business-interruption insurance can providefunds for a temporary source of heat until a new boiler arrives.Depending on the provisions you insert, the coverage may also takecare of the costs of the new machine.
Profit Insurance
Unlike business-interruption insurance, which covers futureprofits, profit insurance covers the loss of goods alreadymanufactured but destroyed before they could be sold. Thisspecialized coverage is aimed at manufacturers.
Credit Insurance
If your business extends credit to another party, person,partnership, or corporation, you could encounter losses stemmingfrom:
- Bankruptcy
- Closure of a financial institution
- Death or physical disability
- Destruction of accounting records
- Political instability in a foreign country
The two major classifications for credit insurance are:
1. General coverage, which applies to those lossesincurred during the one-year policy caused from sales made duringthe year prior to the starting date.
2. Forward coverage, which covers the insured for lossesresulting from accounts that were created by sales made during thepolicy term.
General policies account for the lion’s share of the creditpolicies in force. They cover all debtors falling into givenclasses of credit ratings on a blanket basis. The policy specifiesdollar limits on debtors according to classifications set by Dun& Bradstreet credit ratings. Various levels of blanket coveragecan be assigned depending on the size of the company. Automaticcoverage on unrated accounts can also be provided.
Money and Securities Insurance
You may need additional insurance to cover those peak cash holdingperiods during the business day such as closing, after lunch, orpayday. Check to see if your policy covers money in transit, moneyor securities on the premises during business hours and afterhours, and money at home (when you’re just too tired to go to thebank).
Glass Insurance
Businesses have the option of purchasing a comprehensive policyinsuring breakage of plate glass, neon signs, and showcases fromany source except fire or nuclear reaction. This includes weather,riots, vehicles, or sonic boom. Determine whether this coverageincludes damage to stock by broken glass. Some policies include thecosts of replacing lettering and other ornamentation.
Electronic Equipment
Electronic equipment can be insured for fire, theft, maliciousdamage, accidental damage, mechanical breakdown, or electricalbreakdown. A separate electronic data-processing (EDP) policy cancover hardware as well as software. Should fire occur in thecomputer room, the standard property insurance policy might pay youthe price of replacing a blank roll of computer tape-an EDP policycould compensate you for the cost of reconstructing the data. Theseitems and coverage are above and beyond the normal scope ofbusiness property insurance unless you have a comprehensivepolicy.
Power Interruption
A power interruption endorsement is available on a machinerycontract to provide coverage for losses from interruption ofelectricity, gas, heat, or other energy from public utilities. Thisis critical for those businesses in the perishable food industry orspecialized sectors such as an ice warehouse.
Rain
Rain insurance is designed to cover losses at a certain percentage,for example 60 percent of the gross revenues on the last day notaffected by rainfall. Swap meets, carnivals, auctions, and sportingevents would consider this coverage.
Temperature Damage
In the same vein, this insurance is needed by businesses such asbakeries, dairies, and greenhouses that require the absolutemaintenance of a certain temperature to prevent loss of valuableinventory.
Transportation
Transportation insurance indemnifies your materials in transit.Common carriers like United Parcel Service are liable for mostshipping damages to your goods. They are not liable forunforeseeable “acts of God” such as floods or lightening.
Land shipments most frequently use an inland transit policy.This would include a train derailment but exclude a labor strike orriot. Also excluded are breakage and leakage, however, the commoncarrier is generally liable for these damages.
Truck shipments can be covered by a blanket motor-cargo policy.Federal interstate trucking laws require minimum coverage that maynot offer you full protection.
Fidelity Bonds
Fidelity bonds protect the firm from losses incurred by employeethefts. It is often difficult to establish losses, and onlyestablished losses are reimbursed. These bonds have been used tocover cash losses rather than merchandise losses, even though it’swell known that losses from stolen merchandise far exceed thosefrom cash losses. If applicable to your business, fidelity bondsshould be used more widely to cover losses of both cash andmerchandise.
Surety Bonds
A surety bond protects your company against losses incurred as aresult of the failure of others to perform on schedule. If you’refamiliar with the construction industry, you know the importance ofthis insurance contract. Surety bonds, otherwise known asperformance bonds, guarantee that a person or corporation willperform the service agreed on. The bond guarantees that you havethe financial capacity to perform your duties, and it also backsyour credit. Because your work is guaranteed, you’re able tocompete and bid on jobs with firms that are considerably largerthan yours. Keep in mind that surety bonds may require extensivecredit information and collateral.
Title Insurance
Title insurance is available for a nominal fee and should always berequested for real estate purchases. In cases in which the title isnot conveyed, even though the purchasers thought they had such atitle, they are reimbursed.
Water Damage
Different than flood insurance, water damage insurance covers risksfrom leaking pipes, sprinkler system, backed-up toilets, burstingwater tanks, and a leaking roof.
FAIR Plan Program
The Fair Access to Insurance Requirements (FAIR) Plan wasestablished by the Federal Housing and Urban Development Act asriot insurance in the 1960s. You cannot be refused insurance evenif your company is located in a crime-prone, high-violence area.The FAIR Plan provides coverage for looting, fire, vandalism,building, glass, and inventory if damage occurs during a groupdemonstration.
Other Specialized Packages
Specialized packages include an “errors and omissions rider clause”for owners and managers who are in the business of givingprofessional advice. A director and officer’s liability policy isavailable if you serve on the board of directors of a corporation.A garage owner’s policy covers any damage to vehicles in your careif you are customizing or repairing automobiles. There is also”special liquor legal liability” insurance for claims that stemfrom auto accidents caused by patrons who drink too much at arestaurant or tavern. Companies that use or produce chemicals,drugs, or industrial pollutants are wise to carry specificendorsements for these hazards. If you or your employees work ortravel overseas, a special worldwide liability policy is available.This may or may not include kidnap and extortion coverage.
